Conservation and Development: Lessons from Costa Rica

Between the 1940s and 1980s, most of Costa Rica's forests were destroyed and replaced with highly valued cattle farms and croplands. Aerial photos spanning those four decades show a country steadily going bald. "We call this the striptease of Costa Rica," joked Carlos Manuel Rodríguez, minister of environment and energy, at an event co-sponsored by the Wilson Center's Environmental Change and Security Program and Latin American Program. Costa Rica's deforestation would be no laughing matter, were it not for the government's incredibly successful efforts to resuscitate the forest cover using creative market-based approaches that continue to simultaneously achieve conservation and development.

The majority of Costa Rica has historically been forest land, but in the '40s the government encouraged traditional agriculture and ranching as a means to improve the lives of citizens. Trees quickly became a burden: "At that time, the value of the forest was equal to nothing," Rodríguez explained. And to further promote farming, the Costa Rican congress passed a law taxing "unproductive" land, eliminating any remaining incentive to retain the forests. In just over four decades, rampant deforestation—as much as 55,000 hectares per year—stripped Costa Rica of all but 21 percent of its forest cover. Certain environmental protections, such as the national park system, did emerge during this time, but it wasn't until the early 1990s that the government took significant steps to halt the destruction and preserve the country's remaining tropical resources.

After losing two-thirds of its forests, Costa Rica finally made deforestation illegal in 1992. According to Rodríguez, the government sought clever ways to enforce the law without using armed guards to protect the forests. Instead, the government instituted income tax exemptions for people who planted trees. Furthermore, the government decided people should be compensated for the environmental services provided by their land, including ensuring water resources, mitigating greenhouse gases, protecting biodiversity, and offering scenic beauty. Under this program, people would be paid $50 per hectare—a solid financial incentive to plant and retain trees. Initially, Rodríguez said, corporations were the most eager to replant trees to take advantage of this tax shelter. But soon, the movement trickled down to communities and individuals, including the indigenous populations.

Results from the environmental services program were quickly evident: In the first five years "we went from 21 percent forest to 42 percent with this program," Rodríguez said. In 2000, the forest cover grew to 45 percent; and early data for 2005 shows 52 percent forest cover, he noted. Beyond achieving its environmental goals, the program also resulted in great social gains, largely poverty alleviation. "We've been realizing lately that indigenous communities are the biggest beneficiaries of environmental service payments," he said. "Payments signify between 10 to 30 percent of income to 80 percent of the beneficiaries." Real money being placed in the hands of small farmers caused an explosion of participation. Between 2000 and 2004, indigenous participation rose more than 100 percent and female farm ownership grew from 200 to 1600 farms.

Branching out from the successful payment-for-service program, the government decided to also charge for usage of environmental services. The resulting revenue would be pumped back into the environment to sustain the environmental services program. A 1.5 percent fossil fuels tax, the first to be implemented, now generates between $10-15 million per year. Rodríguez said he faced no major opposition to that tax, but he knew that proposing a tax on water would be harder. "People were going to jump at the tax," he said. "There's a lot of water in Costa Rica. There isn't a real value to it because it's a free resource. And I was going to increase 2000 percent the water access fees." With presidential support, however, he was able to push the tax through. "Now, every user will pay the ecological cost of water," he said. "Every user of water has to have a concession and pay for that water." The water tax will take seven years to come into full effect, at which time it will generate upwards of $25 million dollars.

The rapid reversion of agriculture land back to forest led to anticipated conflicts between the environmental and agriculture sectors, as each wants to use land for their own agendas: "In the tropics," Rodríguez said, "there is always a rift between the agriculture minister and the environment minister." But through sustainable development Rodríguez believes the two factions can work together. He is currently tracking the progress of a pilot program in which the government pays cattle ranchers to increase biodiversity, biomass, and water production. The program is appealing, he said, because it teaches the ranchers how to achieve these goals while also increasing cattle production. The $25,000 start-up cost is fronted by the government and paid back through ecological gains. "Environmental services are as good as dollars," Rodríguez said.

While the current system has created a successful give-and-take between services payment and usage taxation, the next step is to expand taxation to those who benefit from the country's biodiversity. Rodríguez is specifically targeting one industry: eco-tourism, a major factor in Costa Rica's GDP. "The owner of a bus, lodge, airplane, taxi—there are a lot of people who work around the eco-tourism industry who depend on beautiful land," he said. "But we don't know how to charge for that environmental service." Instead, he has implemented programs to pay for the biodiversity on which ecotourism depends. Tourists come from around the world to marvel at Costa Rica's wildlife, plant life, and other natural resources. To preserve these resources, Rodríguez has expanded payment of environmental services to biodiversity conservation, with specific payment for preservation of rare animals like jaguars.

Other environment ministers ask Rodríguez how to implement similarly effective programs in their own countries. "They ask me ‘How can I do this?'" he said. "I tell them they must have political stability." Costa Rica also has many unique qualities that make such a system possible. Originally the poorest of the Spanish colonies, Costa Rica had no gold or minerals. With little to cause internal or external conflict, the country has existed peacefully, fighting no wars in its 180-year history. According to Rodríguez, political stability has allowed long-term plans to continue, rather than change with each new administration. "Consistency has worked," he said. "We have spent over 35 years working and working to get here."

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